Giant Merck buddies up with little KalVista on lead drug, igniting stock with a $760M deal

Andrew Crockett

Pharma giant Merck $MRK is buying into micro cap biotech player KalVista $KALV, bagging an option on a lead drug and outlining a rich potential future for the company if all goes according to plan.

The US/UK hybrid biotech, which started the day with a $72 million market cap, saw its fortunes change instantly as news spread that Merck was paying $8.50 a share for a 10% stake in the company. Its shares rocketed up as news spread that Merck is also paying $37 million upfront to bag an option on KalVista’s drug for diabetic macular edema, KVD001.

The milestones tally up at $715 million, with Merck lining up rights to other DME candidates it might want.

Investors loved it all, coming in to back the company and sending shares up by about 100% this morning.

A Phase II for KVD001 is expected to launch soon, after which Merck can decide if it wants to go the next leg in picking up the option and taking it into Phase III.

KalVista also has small molecule plasma kallikrein inhibitor in the clinic for hereditary angioedema.

Merck doesn’t do a large number of deals, but it doesn’t mind paying a premium in a relatively small deal like this when it sees a biotech doing something it finds intriguing.

“Plasma kallikrein inhibition is a novel approach to the treatment of DME that we believe may offer benefit to a significant number of patients, and an oral therapy particularly would represent a groundbreaking advance for treatment of this indication,” said KalVista CEO Andrew Crockett in a statement. “We have always believed that development and commercialization of our DME therapies would require the resources of a large pharmaceutical company, and we believe Merck has the wherewithal and resources to help us advance development of our DME drug candidates. Importantly for KalVista, this collaboration also meets our strategic objectives of maintaining control of our oral HAE portfolio that we plan to develop independently. We look forward to providing more details about the Phase 2 trial for KVD001 in DME patients as the trial commences.”

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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